Gives insolvency professional 45 days to draw up plan to pay back home buyers or deliver their flats

The Supreme Court on Monday placed the insolvency resolution professional (IRP) back in the saddle to manage Jaypee Infratech Limited and draft an interim scheme to bail out more 30,000 harassed home buyers, mostly from the middle- and lower-income groups, who have invested in the debt-ridden company’s 32 housing projects.

A Bench led by Chief Justice of India Dipak Misra gave the IRP 45 days’ time to draft the resolution plan and place it on record before the Supreme Court.

The court ordered Jaypee Infratech management to hand over all their records to the IRP to help him prepare the scheme. The IRP was directed to protect the interests of the home buyers. The scheme has to keep their needs and financial security in the forefront.

“This is a human problem. We are only concerned with the individual home buyers. You (IRP) have to prepare an interim scheme and show it to us... how you are either going to pay them (home buyers) back their money or deliver them their flats,” Chief Justice Misra observed.

The Bench, also comprising Justices A.M. Khanwilkar and D.Y. Chandrachud, passed an order of restraint on the Jaypee managing director and board of directors from leaving the country without the prior permission of the Supreme Court. Even persons who were the managing director or directors of Jaypee, except the nominees of creditor banks like IDBI, at the time of institution of the insolvency proceedings shall not leave the country without the court’s permission.

₹2,000 crore payment

Jaiprakash Associates was ordered to pay ₹2,000 crore in the Supreme Court before October 27. Prior consent of the court has to be taken again in case any property has to be sold to collect the ₹2,000 crore.

Any proceedings instituted against Jaypee shall now remain stayed as, the court said, the IRP cannot both fight “thousands of claims” as well as draft a resolution plan within the 45-day stipulated time.

Attorney-General K.K. Venugopal, who was specially invited to assist the court, submitted that only the IRP could resuscitate the company. The top law officer for the Government of India said the Supreme Court’s stay order of September 4 of the insolvency proceedings against Jaypee before the NCLT “inadvertently” handed the management back to the Jaypee management, leaving the IRP without a role.

“Home buyers have waited for years. The Insolvency and Bankruptcy Code mandated the corporate resolution process period to be 180 days with an extension of 90 days... a resolution can be brought about only if the IRP is allowed to continue,” Mr. Venugopal submitted. It was this argument which moved the court to modify its September 4 order and bring back the IRP.

Senior advocate Abhishek Manu Singhvi, for IDBI, drew the Bench’s attention to an August 31 judgment of the apex court in the Innoventive Industries case which said the erstwhile management of a company has no role once the insolvency resolution process has been admitted in the National Company Law Tribunal (NCLT) and the management transferred to an insolvency professional.

“Entrenched managements are no longer allowed to continue in management if they cannot pay their debts,” the apex court had held in its 88-page judgment.

Additional Solicitor General Tushar Mehta, Insolvency and Bankruptcy Board of India, said the company under the IRP has already delivered 627 units to home buyers.

Senior advocate P.S. Patwalia, for Jaypee, said the company is committed to delivering the flats to home buyers.